If a Republican or conservative was in the White House, the Associated Press's Martin Crutsinger would have found a reason to be unimpressed in his dispatch today about how low initial unemployment claims continue to be, even as hiring has been slowing down. (Ideally, reporters should just relay the facts and leave the theorizing out of their stories, but that ship has sadly long since sailed.)
Crutsinger exhibited no real curiosity because a Democrat is in the White House. Therefore, it's left to New Media to at least get the alternative ideas out there; a contributor at the contrarian blog Zero Hedge did that several days ago. After the jump, readers will find most of Crutsinger's report covering the Department of Labor's initial claims release today, and a healthly chunk of the just-mentioned Zero Hedge analysis.
Crutsinger also misstated the length of time during which it has become clear that the economy is softening (bolds are mine throughout this post):
APPLICATIONS FOR US WEEKLY JOBLESS BENEFITS ROSE LAST WEEK
The number of Americans seeking unemployment benefits rose slightly last week but the four-week average declined to the lowest level in more than four decades, another sign the job market is healthy.
The number of people applying for benefits edged up by 3,000 last week to 259,000 after two weeks of declines, the Labor Department said Thursday. The four-week average for benefit applications fell by 2,000 to 263,250, the lowest level since December 1973.
There are indications that the economy has slowed in recent weeks. A strong dollar has hurt U.S. export sales and industrial output has weakened as businesses cut back on orders in an effort to trim excess supplies. But so far, this weakness has not spurred a rise in layoffs.
Benefit applications are a proxy for job layoffs.
Before getting to the final sentence of the AP excerpt, let's note for the record that "the economy has slowed" during at least the past 16 (if not more) weeks since the beginning of July — not a very few "recent weeks" as Crutsinger implied. The AP itself carried a third-quarter growth prediction of just 1.3 percent on an annualized basis in a Tuesday story on the government's regional and state employment report. Moody's is currently predicting 1.1 percent, and the Federal Reserve Bank of Atlanta projects 0.9 percent.
Additionally, several metrics tied or relating to production as opposed to consumption (industrial production; manufacturing and trade production and sales) have shown year-over-year monthly contractions since the first of the year; in one instance (factory orders and shipments), it goes back further into the fourth quarter of last year.
As to benefit applications serving as a proxy for layoffs, that link appears to have become very tenuous. Benefit apps remain low, while mass layoffs have been rising. Yes, I realize that these are announced layoffs, and only those above a certain threshold. The disconnect is at the very least unusual, and deserves an attempt at an explanation.
Lance Roberts at Zero Hedge at least attempted one, as the rest of the press sat back:
I (have) received a good bit of pushback from the "always optimistic crowd" stating that the surging levels of job openings and plunging jobless claims support continued job gains in the future.
This is not exactly true.
... There is a point in every economic/employment cycle where employers exhaust the ability to "cut costs" though the reduction of the labor force. When the labor forced has been reduced to its critical operational level, businesses begin to "hoard" what labor they have, maximize the existing labor force's productivity (increase output with minimal increases in labor costs) and hire additional labor, primarily temporary, only when demand forces expansion.
This issue of "labor hoarding" explains much of the sharp drop in initial weekly jobless claims. As companies literally "run out" of employees to layoff or discharge, the number of individuals filing for initial claims decline.
... the mistake is assuming that just because initial claims are declining, the economy, and specifically full-time employment, is markedly improving ... it is more likely a sign of peak employment instead.
The "good news" is that for those that are currently employed - job safety is high. Businesses are indeed hiring, but prefer to hire from the "currently employed" labor pool rather than the unemployed masses.
The "bad news" is that for those unemployed, full-time employment remains elusive, and wages remain suppressed due to the high competition for available work.
So, while jobless claims and job openings may be touted as signs of an improving job market, the data suggests that we have likely seen the peak for this current economic cycle.
If economic growth was genuinely robust, Mr. Roberts' case would be weak. But then again, if economic growth were genuinely robust, we'd be seeing increases in real wages and salaries which have been mostly elusive since the recession's official end over six years ago. Also supporting Roberts' case is the fact that not seasonally adjusted employment at temp agencies in September reached an all-time high of 2.98 million — and that's before the annual wave of Christmas season-related temp hiring kicks in.
The AP's Crutsinger, and most other establishment press reporters, can't be bothered with trying to find alternatives to "all is well." If someone other than a Democrat was in the White House, they'd be be furiously searching for them, and if they couldn't find them, they'd make them up. Remember the "hamburger flippers" lies about job growth during the 1980s?
Cross=posted at BizzyBlog.com.
